Wednesday, December 08, 2010

Thou Shall Not Steal: Not Even from Rich Oil Tycoons

By Moshe Feiglin

Translated from the NRG website

Editor's note: A number of months ago, the Noble Gas Company discovered vast stores of natural gas in Israel's territorial waters. According to a prior agreement with the Israeli government, the royalties from the discovery were supposed to have been substantial. But after politicians mixed in, the government appointed the Sheshinski Committee, which advised Israel to re-adjust its tax/royalties structure on hydrocarbons. This proposal means that Israel will renege on its initial agreement with the drilling company and significantly lower the sum of the royalties.

First, proper disclosure. I have never met oil tycoon Yitzchak Teshuvah and I do not have any stocks or interests in Noble Energy. I have no reason to support them. On the contrary - as a politician, it is worthwhile for me to ride the populist wave and vociferously align with the witch hunt against the tycoons who "steal" the public's wealth.

But I have a small problem. Theft is theft and robbery is robbery - even when the victims are wealthy. True, many aspects of the Israeli version of capitalism are avaricious. The huge profits pocketed by Israel's banks are mostly based on interest gained on private accounts - not from actual business deals. This totally contradicts Jewish law and the Jewish spirit. This means that the banks are a motor of servitude - not of economic growth, as they are supposed to be.

The banks are only one glaring example. The salary gap in Israel is among the highest in the world. It's a dog eat dog world out there and the cunning chap who amasses power uses it to trample the person beneath him - without blinking an eye.

The solution for our problem with capitalism is not to institute socialism. Socialism is simply a sophisticated form of robbery that makes everybody poor. An ideology that rejects the sanctity of one's possessions will ultimately lead to a complete contempt for the sanctity of life. It is no coincidence that Stalin and Mao were the greatest murderers in the history of mankind. For some reason, we also seem to have forgotten that "Nazism" is a shortened version of "National Socialism." Socialism is the last thing we need.

We suffer from an exploitative form of capitalism because we have adopted it without our Jewish culture that would refine and restrain it. Jewish economics is based on a triangle. Its base is the sanctity of life and possessions, a.k.a. capitalism. But the triangle has two other sides: faith and kindness. The three Forefathers of the Nation of Israel; Abraham, Isaac and Jacob, were billionaires. The approach that associates property with immorality is Christian. But if you remove capitalism from the ethical envelope of Jewish faith and kindness - you are left with the jungle that we experience today.

Back to the gas royalties. It is sad to see the transformation of politicians who espouse capitalism at every opportunity into populist Robin Hoods, robbing the rich to feed the poor. What usually happens in these cases is that if the Robin Hood doesn't know when to stop when he gets into power, the rich flee and he proceeds to rob the next layer of society.

Let us assume that a moment before the gas discovery, Yitzchak Teshuvah and Nobel Energy had given up and turned to Israel's Treasury with a demand to return the millions that they had invested in searching for gas fields. What would the Finance Minister have answered? Would he have fought for their right to get their money back? Ridiculous. He would have summarily told them that business is business - and justifiably so.

Yitzchak Teshuva took a huge risk and brought Noble Energy and hundreds of private investors to Israel. Until Teshuva's discovery, all the other exploratory dills had failed, distancing the large drilling companies from Israel. Teshuva and Noble Energy came nevertheless - largely thanks to the special conditions granted them - conditions that correspond to the risk that they were willing to take. If not for these special conditions, nobody would have royalties today - not Teshuva and not the citizens of Israel. Thanks to his financial daring, major oil and gas fields were finally discovered in Israel, absolving us of dependence on others for our energy needs.

Of all the drilling concessions that Israel can distribute, Teshuva and Noble Energy got less than ten percent. Now that Teshuva and Noble have paved the way, Israel clearly has to demand more royalties in future tenders. But to lower the royalties that Teshuva and Noble get after they have already taken the financial risk and discovered the gas fields is simply highway robbery.

Whoever thinks that this exploitation will add money to his pocket, does not understand the dynamics that will take place. The money will not go to education, health or anything else useful. On the contrary; it will only do harm.

How do I know that? Very simple. Israel already has plenty of money today, but the problems are not being solved. Israel is a rich country, but nevertheless, it lacks money for education and health. Our foreign debt is the lowest in the world, our currency the most stable in the Western world and our gross national product is rising all the time. This did not happen because we got lucky and discovered oil. It is because of a much more precious treasure that fell into our laps in the 90s - the industrious and intelligent immigration to Israel from the former Soviet Union that met an economy that was emerging from socialism. Yes, Netanyahu has a share in this.

We became wealthy and with G-d's help, will continue to become wealthy irregardless of oil discoveries. The fact that the money does not go where it should is an issue of culture and preferences. What is certain is that newly discovered oil will not solve the problem - and if we lapse into populist socialism - we will lose what we have already achieved.